Small Business Tax Rankings Released

The “Small Business Tax Index 2017: Best to Worst State Tax Systems for Entrepreneurship and Small Business” ranks the 50 states according to the costs of their tax systems for entrepreneurship and small business.

View an interactive U.S. map of “Small Business Tax Index 2017” results.

Raymond J. Keating, chief economist for the Small Business & Entrepreneurship (SBE) Council and author of the report, said: “While there is much discussion in Congress and the Trump administration about making the federal tax system more competitive, these issues obviously reach down to state and local levels as well. That’s the focus of SBE Council’s ‘Small Business Tax Index 2017.’ Specifically, which states are among the least burdensome in terms of taxes, and which inflict the weightiest burdens on small businesses?”

The SBE Council pulls together 26 different tax measures, and combines those into one tax score that allows the 50 states to be compared and ranked. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

According to the “Small Business Tax Index 2017,” the 10 best state tax systems are: 1) Nevada, 2) Texas, 3) South Dakota, 4) Wyoming, 5) Washington, 6) Florida, 7) Alabama, 8) Ohio, 9) North Carolina, and 10) Colorado.

The bottom 10 include: 41) Connecticut, 42) Oregon, 43) New York, 44) Vermont, 45) Hawaii, 46) Iowa, 47) Minnesota, 48) Maine, 49) New Jersey, and 50) California.

Since last year’s report, several states have made significant tax changes.

Five states – Arizona, Indiana, New Hampshire, New Mexico, and North Carolina – have improved their tax climates by reducing their personal or corporate income tax rates. Other states – such as New Mexico and Tennessee – have scheduled changes that will improve their tax climates for entrepreneurship, business and investment in coming years. Unfortunately, all of the news is not good. Kansas, Maine and New York have made tax changes that are negatives.

Workin’ for a Livin’

I was really excited to get to see country mega-group Alabama in concert recently. I’d been brushing up on their music, and one hit song really stuck out to me because it’s incredibly applicable to the message we share at Indiana Skills.

It’s called “Forty Hour Week (For a Livin’),” and the song glorifies middle-skill jobs and the individuals who do them. It’s really quite inspirational. One line of the chorus goes, “Hello Detroit auto worker, let me thank you for your time. You work a 40-hour week for a living, just to send it on down the line.” The song also highlights farmers, steel workers, coal miners and several other hard-working folks.

One comment on the video struck me. It reads, “The sad part is that most of these jobs are automated now.” The Ready Indiana staff has traveled from Lafayette to Columbus to Princeton to Valparaiso, and we can tell you that hands-on labor is not dead. In fact, it’s where a good portion of the job demand in Indiana lies. And these jobs make good careers. See the facts at www.IndianaSkills.com.

And be sure to check out this classic country tune:

Gigerich: Indiana Business Climate is Good News, Bad News Scenario

Larry Gigerich of site selector Ginovus penned an informative column for Inside INdiana Business about Indiana's business climate. While we have come a long way and are currently envied by many states, there is still work to be done. He writes:

A few weeks ago, the Kauffman Foundation and Thumbtack.com released an annual ranking of states for their friendliness to small businesses. Indiana ranked 15th for 2013. The study analyzed several factors including items related to tax climate, work force development and regulatory issues. Eight-thousand small businesses were contacted for feedback regarding the study's criteria. Here is how Indiana ranked in each category.

1. Overall Friendliness: B+
2. Ease of Starting a Business: B+
3. Ease of Hiring: F
4. Regulations: C
5. Health and Safety: D
6. Employment, Labor and Hiring: C-
7. Tax Code: D
8. Licensing: A-
9. Environmental: D
10. Zoning: B-
11. Training and Networking Programs: C-

The grades given to Indiana are not surprising. Work force development and job training have been a focus of Governor Mike Pence and the legislature since the beginning of the year. Indiana's educational achievement, continuing learning for adults in the work force and availability of certification/credential programs have not been where they need to be. While progress has been made, there is still much to be done by government, educational providers, not-for-profits and the private sectors.

Indiana has been recognized as a relatively easy place to start and grow a business. This report points to that in terms of licensing, zoning and other factors affecting the launch of a new business.

The tax code ranking is a bit surprising, but the survey asked small businesses if they were paying too much in taxes for their locations. The elimination of the state inheritance tax, which impacts small and family-owned businesses, could help improve this ranking.

Indiana continues to struggle with rankings where health and environmental issues are considered. In particular, the state's obesity and smoking rates are unacceptably high. These items impact healthcare costs, number of missed days of work and quality of life. In terms of the environment, Indiana's long-term large manufacturing presence has impacted water, air and soil quality. While important steps have been taken in the areas, there is much left to be done.

The top five states for small businesses are (in order): Utah, Alabama, New Hampshire, Idaho and Texas. The bottom five are (in order): Illinois, California, Hawaii, Maine and Rhode Island.

In summary, Indiana's ranking relative to the rest of the country is good. Policymakers in the state should focus on ways to improve our weaknesses in order to move Indiana into the top 10. Due to the fact that Indiana has never been a location for large headquarters for companies, small businesses are and will continue to be the lifeblood of the state's economic growth.

Governors Faced with Difficult Medicaid Decision

The Medicaid expansion decision for each state is one of several critical aspects of the Affordable Care Act, which was recently deemed Constitutional by the Supreme Court. Although federal dollars are at stake, it’s not a given that states (including Indiana) will agree to the changes to the program for low-income residents. Stateline offers a strong summary.

Although the lineup is shifting, more than a dozen Republican governors have suggested they might decline to participate in the Medicaid expansion. Governors in Florida, Iowa, Kansas, Louisiana, Nebraska, Texas, South Carolina and Wisconsin have said they will not participate. GOP governors in Alabama, Georgia, Indiana, Mississippi, Nevada and Virginia indicate they are leaning in that direction.

Meanwhile, about a dozen Democratic governors have said their states will opt in. The rest have not declared their intentions.

According to data from the Congressional Budget Office, the federal government would spend $923 billion on a full Medicaid expansion between 2014 and 2022, and states would spend about $73 billion. But nobody is sure how many people will enroll in the Medicaid expansion. According to a 2010 report by the Kaiser Family Foundation, states’ share of the Medicaid expansion could range anywhere from $20 billion to $43 billion in the first five years.

According to Kaiser, most states opting into the expansion likely would have to ramp up their Medicaid spending between 2014 and 2019, but four would spend less (Hawaii, Maine, Massachusetts and Vermont) and several others would have to boost state spending only slightly.

Mississippi’s Medicaid program, for example, cost a total of $4 billion in 2011—the federal government paid $3 billion, and the state paid $1 billion. Expanding that program to everybody at or below 138 percent of the federal poverty line would cost the state as much as $581 million between 2014 and 2019, according to Kaiser’s 2010 study.  That’s a 6.4 percent increase in state spending compared to what Mississippi would spend without an expansion

The day after the Supreme Court ruled the Medicaid expansion was optional, Mississippi Governor Phil Bryant, a Republican, said: “Although I am continuing to review the ruling by the Supreme Court, I would resist any expansion of Medicaid that could result in significant tax increases or dramatic cuts to education, public safety and job creation.”

Column: Right-to-Work States Have Economic Advantage

Andrea Neal of the Indiana Policy Review Foundation penned the following column on right-to-work laws for the Times of Northwest Indiana. The Indiana Chamber has been an advocate for developing a right-to-work law in the state:

It doesn’t take an economist to spot the common thread in these recent economic development headlines:

• Chattanooga, Tenn., July 29: "Volkswagen hires 2,000th employee."
• Shreveport, La., July 28: "NJ-based bag manufacturer to build Louisiana plant."
• Decatur, Ala., July 21: "Polyplex to build $185 million plant."
• West Point, Ga., July 7: "Kia builds vehicle No. 300,000."

All four stories have Southern datelines. All come from states with right-to-work laws, which prohibit labor contracts that require employees to join a union or pay a union representation fee.

This is the issue that prompted the five-week House Democratic walkout during the 2011 Indiana General Assembly. The Democrats — a minority in both House and Senate — had no other leverage. So when a right-to-work bill came up unexpectedly in a session that was supposed to be about the budget, redistricting and education, they bolted. Republicans capitulated and took the legislation off the table.

In 2012, it will return with a vengeance, and this time Democrats can’t avoid it. Right-to-work has been promised a full public airing. The Interim Study Committee on Employment Issues, chaired by Sen. Phil Boots, R-Crawfordsville, is taking a first crack this summer and hopes to recommend a bill by November. Gov. Mitch Daniels, who didn’t support the bill last session, has hinted he might this time around.

The debate goes back to 1935 when Congress passed the National Labor Relations Act protecting employees’ rights to form, join and be involved in unions. One section of the law permitted contracts that made union membership a condition of employment. Congress modified that language in 1947 when it said states could prohibit these. In response, 22 states passed right-to-work laws. Indiana is one of 28 that currently does not have such a law.

Predictably, at last week’s study committee hearing, business interests favored right-to-work while union leaders opposed it. The economists were divided. Richard Vedder, of Ohio University, summarized research showing that right-to-work states have higher rates of employment, productivity and personal income growth. Marty Wolfson, of the University of Notre Dame, testified that right-to-work laws result in lower wages and benefits.

Their conclusions are not mutually exclusive. If you grant Wolfson’s point, the policy question remains: Which is better? A state with higher wages for some but a weaker economy overall or one with lower wages for some and more vibrant growth, not to mention freedom of choice for the worker?

Companies are voting with their feet. To the extent that manufacturers are expanding in the United States — and few are — they are choosing the South and West where right-to-work is prevalent.

Alabama Gov. Robert Bentley, in announcing the $185 million project by Polyplex, the world’s fourth-largest manufacturer of thin polyester film, was blunt: "Alabama is a right-to-work state, and we will continue to be one. That’s one of our advantages for companies who are looking to build on new sites."

Companies won’t readily admit this because what they say can and will be used against them. Currently pending at the National Labor Relations Board is a case against Boeing, which recently opened a second production facility in South Carolina for its 787 Dreamliner airplane.

South Carolina has a right-to-work law. Boeing’s other production site is in Washington state, which does not. The board’s complaint alleges that Boeing chose South Carolina in retaliation for strikes by Washington workers in violation of the National Labor Relations Act. Its proposed remedy would force Boeing to move its South Carolina operation to Washington. This would be an extraordinary use of federal power to promote the cause of organized labor at one company’s expense.

Right-to-work does not destroy unions. It gives workers the right to decide for themselves whether to join. "This greater accountability results in unions that are more responsive to their members and more reasonable in their wage and work rule demands," the Mackinac Center for Public Policy said.

It should come as no surprise to Indiana legislators that expanding industries favor that kind of relationship. The legislative choice is between protecting unions as we know them or protecting the long-term interests of Hoosier workers.

Politics, and the People Who Are Bad At It (an Alabama Story)

Like many politicians in Alabama, mayoral candidate Dorothy Davidson was vying for the endorsement of well-known Univ. of Alabama football coach Nick Saban (likely because he’s known for being a charmer). She wanted to include a photo of her and Saban together, so like any normal person, she figured, "Why not just Photoshop myself on top of a photo of his wife and send it out in a mailer?"

I can’t see what could possibly go wrong here. Al.com has the story:

Bessemer Councilwoman Dorothy Davidson, who is running for mayor of the city, claims she secured Saban’s endorsement of her campaign three weeks ago. Davidson printed it on a color campaign flier that shows her and the coach smiling side by side on a golf course.

But University of Alabama athletics officials on Tuesday said there is no such endorsement. And the photo of Davidson and Saban together is not real, but digitally altered from another photo.

"Coach Saban has not been contacted for a political endorsement of any kind," Associate Athletics Director Jeff Purinton wrote in an e-mail response to questions from The Birmingham News.

Davidson, when contacted about the campaign ad and photo on Tuesday afternoon, at first said the image of her and Saban together was real and taken about three weeks ago. However, when presented later with a 2007 photo of Saban and his wife that appears to be the base photo onto which Davidson’s image was added, the candidate acknowledged that her image was digitally added to the 2007 photo.

Remote Areas to See Broadband Uptick

Stateline.org recently examined state and federal initiatives to bring broadband service to America’s rural areas:

Maine gives out about $1 million about every 10 months to help its residents get high-speed Internet connections. In July, it approved nine projects costing the state almost $800,000 to get 5,000 families hooked up.

States across the country have pursued similar efforts toward creating statewide broadband policies and better access for their residents. But their scale pales in comparison to the $7.2 billion in stimulus money the federal government has committed over the next two years to improve high-speed Internet connections around the country.

Every state is supposed to get a share, and every governor will get a chance to weigh in on how the funds are spent. In this wash of new money, state officials are scurrying to identify the states’ greatest needs, coaching providers applying for stimulus money and developing overarching plans for how to roll out expanded service.

Most of the stimulus money will go toward building out high-speed connections to people in hard-to-reach places. Larry Landis, an Indiana Utility Commissioner active in national broadband efforts, says states have an “obligation to address those who are currently unserved” by broadband.

“What we need is a broadband consensus which nurtures state initiatives to build out to serve the least, the last and the lost,” he said.

The “least,” he says, are the working poor who haven’t been able to afford broadband. The “last” are those “currently on the fringes of the infrastructure to deliver on the promise of broadband.” The “lost” are consumers who could buy broadband but don’t.

Currently, 63 percent of adults have broadband at home, compared to just 7 percent who use dial-up connections, according to the Pew Internet & American Life Project, which, like Stateline.org, is funded by The Pew Charitable Trusts. Half of the U.S. adults who don’t have broadband at home say they don’t see the need for it, the study said. One in five respondents said they didn’t get a high-speed connection because it was too costly.

Also, take a look at how a Noblesville company is working to help Alabama with its broadband efforts in the May/June BizVoice.

Gingrich Shares Education Ideas: “Education System is Dead”

"Our education system is dead. It’s propped up by unions, bureaucracy and schools of education."

That’s the take of former Speaker of the House Newt Gingrich, who will be the keynote speaker at the Indiana Chamber’s 19th Annual Awards Dinner on November 6.

At a speech before local and state elected officials earlier this year, Gingrich also offered:

  • An automatic college scholarship for each year that a student graduates early from high school
  • Dual credit programs. In Selma, Alabama, 32 of 65 high school graduates also received associate degrees along with their high school diplomas. Gingrich: "That is the beginning of the future."
  • Abolish state curriculums and get rid of departments of education
  • All states should have an outside review panel look at the costs of higher education
  • The current system will "never fix the pile of federal bureaucracy on top of state bureaucracy on top of regional bureacracy on top of local bureaucracy."

Gingrich is coming to town. You don’t want to miss him.